The Olive Industry. A Marketing Study. A report for the Rural Industries Research and Development Corporation

Transcription

1 The Olive Industry A Marketing Study A report for the Rural Industries Research and Development Corporation by D G McEvoy & E E Gomez, Department of Primary Industries, Qld August 1999 RIRDC Publication No 99/86 RIRDC Project No DAQ-210A

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3 1999 Rural Industries Research and Development Corporation All rights reserved. ISBN ISSN The Olive Industry: A Marketing Study Publication no. 99/86 Project no. DAQ-210A The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report. This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone Researcher Contact Details D. G. McEvoy Rural Industries Business Services Department of Primary Industries, Queensland PO Box 102 TOOWOOMBA QLD 4350 Phone: (07) Fax: (07) RIRDC Contact Details Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 Phone: (06) Fax: (06) rirdc@rirdc.gov.au Internet: Published in August 1999 Printed on environmental friendly paper by Canprint iii

4 Foreword Rising imports and domestic consumption have encouraged new plantings of olive trees in Australia, and according to conservative estimates, the total number of trees may reach more than 1.5 million by the year Recent research has concentrated on production aspects, but only limited research has been conducted into the marketing aspects of olive products. This project was initiated as a response to the considerable interest in olive production and procession across the nation and aims to provide information on the marketing aspects of the Australian olive industry. It is one of two RIRDC reports focusing on the marketing aspects of olive production. The first report, Potential for Establishing an Olive Industry in Australia (published in 1998), used qualitative analysis to gain a basic understanding of the main issues facing the industry. This second report builds on the findings of the first report and uses quantitative analysis to further understand the market for olive products in Australia. The publication also presents an analysis of the main competitor olive-producing countries, providing an insight into the international scene, in terms of both competitors and potential markets. This report, a new addition to RIRDCs diverse range of almost 400 research publications, forms part of our New Plant Products R&D program, which aims to facilitate the development of new industries based on plants or plant products that have commercial potential for Australia. Most of our publications are available for viewing, downloading or purchasing online through our website: downloads at purchases at Peter Core Managing Director Rural Industries Research and Development Corporation iv

5 Acknowledgments The authors wish to express their gratitude to the Rural Industries Research and Development Corporation (RIRDC) for providing financial support for this project, and also to the Committee and members of the Australian Olive Association (AOA) and the Australian Olive Oil Association (AOOA) for their support in kind. The authors would like to express their appreciation to members of AUSTRADE and Queensland Government offices in the countries examined in the report. Special thanks to members of government departments of statistics in the countries contacted and to the International Olive Oil Council (IOOC). Thanks also to Mr. Manuel Parras Rosa of the University of Jaén, Spain, for information provided. The authors are grateful to members of the public who answered the survey used in this analysis, and to participants of the focus groups. Finally, the authors would like to thank Ms Janelle McPhail and Dr Jim Longmire from the University of Southern Queensland (USQ) for assisting with the report. v

6 Contents Foreword iii Acknowledgments...iv Contents...vi Tables... viii Figures...x Executive Summary... xiii Introduction The International Market World Production of Raw Olives Oils and Fats World Olive Oil Market World Table Olive Market World Trade in Olive Products European Assistance Concluding Remarks Competitor Countries Turkey Tunisia Syria Egypt Morocco Portugal Greece Italy Spain Concluding Remarks Overseas Markets Introduction Trends in the Asian Region Thailand Hong Kong South Korea China Singapore Japan Australian Production and Consumption Forecasts Domestic Production of All Olive Oils Domestic Consumption of All Olive Oils...57 vi

7 4.3 Market Shares Domestic Production of Table Olives Concluding Remarks Australian Production and Markets Domestic Production Australian Imports of Olive Products The Retail Market Segment Exports of Olive Products Concluding Remarks Marketing Study Introduction Objectives Methodology Results: Olive Oil Results: Olives Concluding Remarks...91 References...92 Appendix...96 RIRDC Publications - New Plant Products vii

8 Tables Table 1.1 : Trend in Consumption of Olive Oils, to (tonnes x 1000)...6 Table 1.2 : Per Capita Consum of Olive Oil, (kg)...6 Table 1.3 : Per Capita Consumption of Table Olives, (kg)...9 Table 1.4 : Main Olive Oil Exporting Countries, to (tonnes x 1000)...10 Table 1.5 : Main Olive Oil Importing Countries, to (tonnes x 1000)...10 Table 1.6 : Main Table Olive Exporting Countries, to (tonnes x 1000)...11 Table 1.7 : Main Table Olive Importing Countries, to (tonnes x 1000)...11 Table 1.8 : Prices and rates of assistance (ECU/100 kg), and s...12 Table 1.9 : EU Import Concessions to Mediterranean Countries...14 Table 2.1 : The Spanish Olive Industry (hectares)...35 Table 2.2 : Spain New Areas Planted, Table 2.3 : Number of Trees and Tree Density of Spanish Olive Groves, Table 3.1 : Asian Sub-regions...41 Table 3.2 : Thailand Consumption of Oils and Fats, (tonnes x 1000)...42 Table 3.3 : Thailand Food Service Market by Sector, (Baht million)...43 Table 3.4 : Hong Kong Consumption of Oil and Fats, (tonnes x 1000)...45 Table 3.5 : South Korea Consumption of Oil and Fats, (tonnes x 1000)...46 Table 3.6 : China - Consumption of Oil and Fats, (tonnes x 1000)...47 Table 3.7 : Singapore - Consumption of Oil and Fats, (tonnes x 1000)...48 Table 3.8 : Japan Olive Oil Imports by Type of Oil (tonnes)...50 Table 3.9 : Consumption of Major Oils, 1995 (Tonnes)...50 Table 3.10 : Japan s Main Supermarket Chains...54 Table 4.1 : Production of Raw Olives, Table 4.2 : Olive Oil Produced, Table 4.3 : Olive Oil Consumption, Table 4.5 : Virgin Olive Oil Production, 2006 (tonnes)...59 Table 4.6 : Pure Olive Oil Production, Table 4.7 : Consumption of Virgin Olive Oil, Table 4.8 : Consumption of Pure Olive Oil, Table 4.9 : Virgin Potential Market Shares for Australian Producers, Table 4.10 : Pure Oil Potential Market Shares for Australian Producers, Table 4.11 : Production of Raw Olives, Table 4.12 : Consumption of Table Olives, Table 4.13 : Table Olives Market Shares for Australian Producers, Table 5.1 : Production of Olives by State, (kg)...65 Table 5.2 : Estimated Olive Tree Plantings, 1996 and Table 5.3 : Suppliers of Virgin Olive Oil to the Australian Market, Table 5.4 : Suppliers of Pure Olive Oil* to the Australian Market, Table 5.5 : Suppliers of Olives to the Australian Market, Table 6.1 : Use of Olive Oils in the Household...74 Table 6.2 : Reasons for Buying Olive Oil...76 Table 6.3 : Reasons for buying Australian olive oil...77 viii

9 Table 6.4 : Demographic Variables and Olive Oil Consumption...78 Table 6.5 : Sex...79 Table 6.6 : Age...79 Table 6.7 : Education Levels...80 Table 6.8 : Occupation...80 Table 6.9 : Household Income...81 Table 6.10 : Language Background...81 Table 6.11 : Country of Birth...81 Table 6.12 : Consumption of Olives in Households...83 Table 6.13 : Demographic Variables and Table Olive Consumption...86 Table 6.14 : Sex...87 Table 6.15 : Age...88 Table 6.16 : Education levels...88 Table 6.17 : Occupation...89 Table 6.18 : Household Income...89 Table 6.19 : Language Background...89 Table 6.20 : Country of Birth...90 ix

10 Figures Figure 1.1 : World Raw Olive Production, Figure 1.2a : Area Harvested, Figure 1.2b : Number of Olive Trees, Figure 1.3a : Total Oil Production*, Figure 1.3b : Total Oil Consumption*, Figure 1.4 : World Production of Olive Oil, to Figure 1.5a : Olive Oil Production by Country, Figure 1.5b : Olive Oil Consumption by Country, Figure 1.6 : World Production of Table Olives, to Figure 1.7a : Table Olive Production by Country, Figure 1.7b : Table Olive Consumption by Country, Figure 1.8 : Production of Table Olives by Type, to Figure 1.9a : Production of Green Olives, Figure 1.9b : Production Black Olives, Figure 1.9c : Production of Olives Turning Colour, Figure 1.10a : Consumption of Green Olives, Figure 1.10b : Consumption of Black Olives, Figure 1.10c : Consumption of Olives Turning Colour, Figure 2.1 : Turkey s Olive Production, Figure 2.2a : Turkey Exports of Olive Oil, Figure 2.2b : Turkey Exports of Table Olive, Figure 2.3 : Tunisia Olive Production, Figure 2.4a : Tunisia Exports of Olive Oil (Tonnes)...20 Figure 2.4b : Tunisia Exports of Table Olives, (Tonnes)...20 Figure 2.5 : Syria Olive Production, Figure 2.6 : Egypt Olive Production, Figure 2.7 : Morocco Olive Production, Figure 2.8a : Morocco Olive Oil Exports, Figure 2.8b : Morocco Table Olive Exports, Figure 2.9 : Portugal Olive Production, Figure 2.10a : Portugal Exports of Olive oil, Figure 2.10b : Portugal Imports of Olive Oil, Figure 2.11a : Portugal Imports of Table Olives, Figure 2.11b : Portugal Imports of Table Olives, Figure 2.12 : Greece Olive Production, Figure 2.13a : Greece Exports of Olive Oil, Figure 2.13b : Greece Imports of Olive Oil, Figure 2.14a : Greece Exports of Table Olives, Figure 2.14b : Greece Imports of Table Olives, Figure 2.15 : Italy s Olive Production, Figure 2.16a : Italy Exports of Olive Oil, Figure 2.16b : Italy Imports of Olive Oil, x

11 Figure 2.17a : Italy Exports of Table Olives, Figure 2.17b : Italy Imports of Table Olives, Figure 2.18 : Spain Olive Production, Figure 2.19a : Spain Area Planted, Figure 2.19b : Spain Age of Olive Groves, Figure 2.20a : Spanish Production of Olive Oil, to Figure 2.20b : Spanish Production of Table Olives, to Figure 2.21a : Spain Exports of Olive Oil, Figure 2.21b : Spain Imports of Olive Oil, Figure 2.22a : Spain Exports of Table Olives, Figure 2.22b : Spain Imports of Table Olives, Figure 3.1a : Imports of Olive Oil into the Asian Region, Figure 3.1b : Imports of Preserved Olives into the Asian Region, Figure 3.2a : Thailand Olive Oil Imports, Figure 3.2b : Thailand Table Olive Imports, Figure 3.3a : Hong Kong Olive Oil Imports, Figure 3.3b : Hong Kong Table Olive Imports, Figure 3.4a : Korea Olive Oil Imports, Figure 3.4b : Korea Table Olive Imports, Figure 3.5a : China - Olive Oil Imports, Figure 3.5b : China - Table Olives Imports, Figure 3.6a : Singapore - Olive Oil Imports, Figure 3.6b : Singapore - Table Olive Imports, Figure 3.7a : Japan - Olive Oil Imports, Figure 3.7b : Japan - Table Olives Imports, Figure 5.1a : Imports of Olive products by Value, Figure 5.1b : Imports of Olive Products by Volume, Figure 5.2a : Imports of Olive Oil by Volume, Figure 5.2b : Imports of Olive Oil by Value, Figure 5.3a : Import Shares of Olive Types by Volume, Figure 5.3b : Import Shares of Olive Type by Value, Figure 5.4a : Imports of Olive Types by Volume, )...68 Figure 5.4b : Imports of Olive Types by Value, Figure 5.5a : Oil Segments by Retail Volume Share, Figure 5.5b : Oil Brand Market Shares by Volume, 1997 (%)...69 Figure 5.6a : Olive Oil Market Shares by Volume, 1997 (%)...70 Figure 5.6b : Olive Oil Brand Market Shares by Volume, 1997 (%)...70 Figure 5.7a : Exports of Olive Oil, Figure 5.7b : Exports of Table Olives, Figure 5.8a : Olive Products Exported by Value, Figure 5.8b : Export Destinations for Olive Products by Value, Figure 6.1 : Awareness of Edible Oils in the Market Place...74 Figure 6.2 : Frequency of Olive Oil Purchase...75 Figure 6.3 : Change in use of Olive Oil...75 xi

12 Figure 6.4 : Purchase of Australian Olive Oil...77 Figure 6.5 : Frequency of Olive Purchases...83 Figure 6.6 : Change in Use of Olives...84 Figure 6.7 : Reasons for Purchasing Olives...84 Figure 6.8 : Purchase of Australian Olives...85 Figure 6.9 : Reasons for Purchasing Australian Olives...86 xii

13 Executive Summary This report is the result of collaborative work of the Rural Industries Research and Development Corporation (RIRDC) and the Department of Primary Industries, Queensland (DPI), aimed at providing information on the marketing aspects of the olive industry in Australia. The project was initiated as a response to the considerable interest in olive production and procession across the nation. Interest has been stimulated by an increase in the value of imported olive products into Australia from $30 million in 1988 to $110 million in The overall aim of the research was to assess the market potential for an Australian olive industry. Based on that aim, the following specific objectives were formulated: to understand factors affecting international competition; to assess opportunities in some Asian markets; to forecast potential consumption and production of olive products; to quantify and qualify the domestic market for olive products; to develop a demographic profile of consumers of olive products. The report uses secondary data obtained from a review of the literature and primary data collected using a survey of the eastern seaboard capitals. The field research was conducted in Sydney, Melbourne and Brisbane. Production of Olives and Trade in Olive Products Spain and Italy are by far the major olive producing countries, with 28.8 and 22.8 per cent respectively of world production of raw olives in Despite changes to the European Common Market Organisation (CMO), Spain is still the leader in the olive world, producing 37 per cent of the world s olive oil and 23.7 per cent of its table olives. The competitor analysis carried out for this report places Spain in a strong position, capable of maintaining its leadership. The analysis has also identified countries, such as Tunisia and Turkey, that are emerging as key players in the world market. In most Mediterranean countries governments play an important role in fostering the development of the local industry. For the crop year it was expected that world trade in olive oil would be close to tonnes. Spain continues to be the major olive exporting country with 34 per cent of total world exports, followed by Italy with 24 per cent. Italy (29%) and the United States (22%) are the main importers. World trade in table olives for was expected to be approximately tonnes, with Spain (39%) and Morocco (19%) the major exporters. The United States and Italy are also the main importers of table olives, accounting for 25 and 14 per cent of world imports respectively. Of concern for producers should be the fact that world olive production, and particularly olive oil production, has for the first time exceeded world demand. If world demand does not increase and production continues to rise, supply of olive products is likely to exceed demand in the future. Other important developments in the international arena are changes to the CMO scheme, which will modify the way subsidies are paid. xiii

14 Asian Markets The study identified increases in the level of imports of olive products into Korea, Hong Kong, Singapore, Japan, and to a lesser extent Thailand and China. Among the findings of the research were: Most olive oil consumed is pure olive oil; extra virgin oil is consumed in much smaller volumes. Olive products are seen as luxury food items in most Asian countries. Olive oil and table olives are not widely used in Asian cooking. With the exception of Japan, olive products in most Asian countries are consumed mainly by Western expatriates and utilised by Western restaurants. Consumption of olive oil in Japan has been increasing fast. However, imports from Spain and Italy dominate the consumer market and in some instances these countries have developed partnerships with Japanese oil processors. Countries outside the Mediterranean region may find it difficult to penetrate this market. As olive products are still seen as luxury food items, the economic downturn in South East Asia is likely to affect levels of imports for a number of years. The Australian Market In 1997 Australia imported $ million worth of olive products. Imports of olive oils totalled $86.1 million while table olives accounted for the balance of $24.84 million. Spain supplied 60 per cent of the total olive oil market, followed by Italy (29.7%) and Greece (7.5%). Spain and Greece dominate the table olive market, with 51 and 37 per cent of the market respectively. Australia exported $ worth of olive products, mostly to New Zealand and other countries in the Pacific region. At the retail level olive oil accounts for 22 per cent by volume of all cooking oil sales, the main segments being pure olive oil with 46.7 per cent share of the olive oil market, followed by extra light oil with a 33.4 per cent share. Extra virgin olive oil accounts for less than 20 per cent of olive oil sold. The table olive segment, with sales of $16.6 million in 1997, is the leader in the pickled sector, with 34.4 per cent of the market. Forecast Production and Consumption A basic forecasting model has been used to match expected Australian production and consumption. Production forecasts are based on known tree plantings and a range of possible yields, as well as on past production levels. Consumption has been forecast on the basis of population growth and trends in per capita consumption. The key findings of the analysis are: Australian consumption of olive oil in the year 2006 may reach approximately tonnes, whereas olive oil production, depending on olive yield and oil content, may amount to between and tonnes. The figures imply that an Australian industry needs to secure from 17 to 37 per cent of the domestic market to dispose of its production. However, when olive oil production and consumption are segregated into virgin and pure olive oils, the results change substantially. They show that although Australian producers xiv

15 need to supply 11 to 20.5 per cent of the pure oil market, they would need to supply 36 to 74 per cent of the virgin olive market to dispose of potential production. For table olives the situation is similar: local producers might need to secure between 34 and 51 per cent of the expected market of tonnes. These figures will depend on the accuracy of the assumptions made in respect of the yield of olives per tree, oil content and the number of trees harvested. The domestic industry needs to start developing marketing strategies to ensure that the domestic product captures an appreciable share of the local market. Promotional campaigns will also need to be considered to expand the current levels of consumption. Care should be taken when considering tree planting or the industry may be faced with an oversupply of olive products, resulting in lower prices. Consumer Research Research into the buying habits of households in Sydney, Melbourne and Brisbane indicates that there is almost 99 per cent awareness of olive oil in the market. However, awareness of individual products such as pure olive oil, extra-virgin olive oil and extra-light olive oil is significantly less. For example, only 20.2 per cent of households were aware of extra virgin and only 13.5 per cent aware of extra-light. The use of olive oil in Australian households is quite widespread: 77.1 per cent of respondents indicated that it was purchased for the home. In respect of the types of olive oil 41.8 per cent indicated that they used extra-virgin, 26.3 per cent that they used pure olive oil. In respect of Australian olive oil, 28 per cent of respondents indicated they had purchased the product; 49 per cent had not; and 23 per cent did not know. The main reasons for buying olive oil were health, taste and ideas obtained from recipes. Australian oil was purchased because it was Australian, and for taste and health reasons. Most household purchase of olive oil either every three months or once per month. Of significance is that a majority of respondents indicated that their purchase habit had not changed in the six months period prior to the survey. Fifty-seven per cent of respondents indicated that they purchased table olives and 18.6 per cent that they purchased Australian product. The main reasons for buying olives were taste of the product and its presence as an ingredient in recipes. Frequency of purchase of table olives was mainly once per month, and to a lesser extent once in three months. Most respondents indicated that there had not been any change in the frequency of their purchases during the six months preceding the survey. Issues for the Australian Industry As olive oil usage has penetrated 77 per cent of households, increases in consumption will come mainly from current consumers deciding to use greater quantities of olive oil. The qualitative research found that consumers who buy olive oil because of its health benefits later become accustomed to its flavour. This is of relevance to the Australian industry, as it implies that it is possible to educate consumers into developing a taste for good quality oil. The qualitative research also indicated that although health benefits were perceived as xv

16 important by consumers, they could not explain why this was the case. However, the fact that consumers perceive olive oil as healthy provides the base for a promotional campaign emphasising such benefits and possibly explaining the reasons for them. More than 21 per cent of respondents said they had purchased Australian olive oil, while 18 per cent indicated that did not know whether they had bought it or not. Such responses suggest some confusion in the consumer s mind as to what is Australian produce. Although, olive oil consumption is common to all demographics groups in Australia, the analysis of the survey has provided a profile of a specific market segment that could be targeted by the Australian industry. According to the survey findings, a typical olive oil (or table olive) consumer is a person in the age bracket, highly educated, with a skilled profession and a household income of more than $45 000, and possibly but not necessarily of European origin. This profile could be the basis for the promotional and market distribution strategies that need to be developed by the Australian olive industry. It should be noted that since consumers meeting the target profile identified in this research have a strict notion of quality, special consideration should be given to the design of labelling and packaging. On the world scene, production of raw olives is forecast to increase, resulting in increased supplies of both olive oil and table olives. For olive oil, the situation will become clearer over the next five years; however, it is possible that production may significantly outstrip consumption. In respect of table olives, consumption is expected to continue to increase and so maintain a balance with production. With many Australian olive groves entering commercial production, the industry will need to develop strategies to capture a significant share of the domestic market. It will need to be internationally competitive in a market where price will be a key factor. Appropriate production, processing and marketing strategies will be needed. Opportunities to work with a unified approach and in association with importers, distributors and international associations should be considered. xvi

17 Introduction The value of imported olive products into Australia increased from $30 million in 1988 to $110 million in 1997 (ABS 1998a). Rising imports and domestic consumption have encouraged new plantings of olive trees in Australia, and according to conservative estimates, the total number of trees may reach more than 1.5 million by the year Recent research has concentrated on production aspects, providing useful information on the agronomic and more general aspects of olive harvesting and processing, but only limited research has been conducted into the marketing aspects of olive products. The research project was initiated as a response to the considerable interest being shown in olive production and processing across the nation. This report is one of two focusing on the marketing aspects of olive production. The first report, Potential for Establishing an Olive Industry in Australia (published by RIRDC in 1998), used qualitative analysis (focus groups, in-depth interviews and unstructured questionnaires) to gain a basic understanding of the main issues facing the industry. This second report builds on the findings of the first report and uses quantitative analysis (forecast modelling and structured questionnaires) to further understand the market for olive products in Australia. This report also presents an analysis of the main competitor olive-producing countries. Issues such as trends in the levels of production, imports, exports and domestic policies are examined. It briefly introduces changes to European Union (EU) regulations that may affect the competitiveness of European producers. Furthermore, the report examines market opportunities for olive products in the Asian region, with special attention to the Japanese consumer market; AUSTRADE and Queensland Government officers assisted with the information presented in this section. In general the report provides an insight into the international scene, in terms of both competitors and potential markets. It can be used by the Australian olive industry to gain a better understanding of the domestic consumer market, enabling the industry to develop marketing strategies to capture a share of that market. Objectives The overall aim of this report is to assess the market potential for an Australian olive industry. Based on that aim the following specific objectives were formulated: to understand factors affecting international competition; to assess opportunities in some Asian markets; to forecast potential consumption and production of olive products; to quantify and qualify the domestic market for olive products; to develop a demographic profile of Australian consumers and potential consumers of olive products. 1

18 Methodology The report is based on secondary data obtained from a review of the literature and primary data obtain from surveys. For the secondary data, international data providers such as the Food and Agriculture Organization (FAO), Eurostat, the International Olive Oil Council (IOOC) and JETRO have assisted with statistical information. In each country examined government departments concerned with agriculture and with statistics were contacted. Information provided by AUSTRADE and Queensland Government offices in the Asia region was used to analyse market opportunities. For the Australian industry and the domestic market, a basic forecasting model was used to match expected production and consumption. Production forecasts are based on known tree plantings and a range of possible yields, as well as on past production levels. Consumption is forecast on the basis of population growth and trends in per capita consumption. Australian Bureau of Statistics (ABS) data on the levels of imports and exports, and a series of assumptions in relation to olive yields and oil content, have been employed. The analysis assumes no changes in income levels, price levels or current consumption patterns. The key tool for collecting primary data was a consumer survey. The main findings of the focus groups (Stage I of the research project) were used to design the structure and content of survey. A data gathering company was contracted to conduct the survey. Households in the greater metropolitan areas of the capital cities of Brisbane, Sydney and Melbourne were randomly selected to provide a statistically representative sample. The respondents totalled and were the main grocery buyers for the households surveyed. Limitations In the conduct of the research the following limitations were encountered: In countries where olives are traditionally produced, it was difficult to obtain information on the structure of the olive industry as there are no well-established data collection systems. Due to the economic downturn affecting countries in the Asian region, it was difficult to judge whether past levels of imports will be maintained. Due to the cost of conducting primary market research in foreign markets, it was not possible to use the services of agents in the markets (such as AUSTRADE) to conduct in-depth research. Therefore, the conclusions on market opportunities in Asia are based on secondary data. It is acknowledged that those conclusions might have been different if primary data collection techniques had been employed. It proved difficult to obtain accurate data on Australian production. The data used are based on the figures provided by Primary Industries and Resources South Australia (PIRSA) on expected tree plantings. There can be sampling and non-sampling errors associated with using a survey which could affect the validity of the findings. However, all reasonable measures have been taken to minimise the effect of such errors. 2

19 1 The International Market This section analyses world production and consumption of and trade in olive products. 1.1 World Production of Raw Olives World production of raw olives in 1996 reached a record level of more than 14 million tonnes. This record harvest was mainly the result of favourable weather in olive producing countries, particularly Spain. In 1997 production fell by 12.3 per cent; however it was still well above the average (see Figure 1.1). Figure 1.1 : World Raw Olive Production, Million tonnes Average Source: FAO 1997a Spain and Italy are by far the major olive producing countries, with 28.8 per cent and 22.8 per cent respectively of total world production in Greece (11.2%), Turkey (12.6%) and Tunisia (8.7%) are also major producers. In terms of area harvested, Spain held first place in 1995 with 28 per cent of the total (see Figure 1.2a). Spain had more than 167 million trees planted in 1990 (see Figure 1.2b). Figure 1.2a : Area Harvested, 1995 Figure 1.2b : Number of Olive Trees, 1990 Libya Algeria Syria Morocco Greece Turkey Italy Tunisia Spain ha Algeria China Morocco Syria Portugal Tunisia Turkey Greece Italy Spain Olive trees (million) Source: IOOC 1995; IOOC

20 According to the IOOC there are 789 million trees worldwide, 95 per cent of them in the Mediterranean region (Mesa 1997). European estimates in 1995 indicate that there were 460 million productive trees in the European Union and around 2 million farms engaged mainly in olive growing (EC 1996b). The European Commission recently expressed concern at the record levels of olive production during 1996 and According to the Commission when new trees come into production (which can take three or four years), there is the serious risk that European production would outstrip demand at home and abroad (Smith 1997; EC 1997a). 1.2 Oils and Fats Olive oil accounts for only a minor share of world production and consumption of total oils. In , world production of edible oils and soap fats was forecast to reach 96 million tonnes, with olive oil accounting for only 2.2 per cent (see Figure 1.3a). World consumption of oils and fats reached approximately 97 million tonnes, with olive oil accounting for 2.4 per cent (see Figure 1.3b). Figure 1.3a : Total Oil Production*, Figure 1.3b : Total Oil Consumption*, Olive oil Cottonseed Groundnut Lauric oils Sunflow er Rapeseed Others Palm Soybean Million tonnes Olive Oil Palm kernel Coconut Cottonseed Groundnut Sunflower Other Rapeseed Palm Soybean * figures exclude consumption and production of non-edible fats Source: FAO 1997b; Oil World Million tonnes 1.3 World Olive Oil Market According to IOOC figures, world production of olive oil in reached a record level of tonnes, up 45 per cent from the previous year (see Figure 1.4). Increases in olive production were caused mainly by favourable weather and by structural changes taking place in the production and processing sectors of the EU and other producing countries such as Turkey and Tunisia. For the IOOC, the apparent oversupply of olive oil in may reflect the possibility of a new phase where production might outstrip consumption fairly systematically (IOOC 1997a). This phenomenon would be more evident in the next 5 years, when new groves around the world come into commercial production. Production for was expected to be tonnes, down 13 per cent from the previous year. However, this figure is still above the average for the 1990s (see Figure 1.4). 4

21 Figure 1.4 : World Production of Olive Oil, to Tonnes x (prov.) Crop years (prov.) (prov.) Average to (est.) Source: IOOC 1997a, 1997c For geographic, historical and cultural reasons, consumption and production of olive oil have traditionally been high in a number of countries now members of the EU, particularly countries in the Mediterranean region. In 1996 the EU accounted for more than 70 per cent of world production, with Spain (37%), Greece (15%) and Italy (15%) the major producers (see Figure 1.5a). The region also accounted for almost 70 per cent of world consumption, with Italy (29%), Spain (22%) and Greece (8%) being the major consuming countries (see Figure 1.5b). Figure 1.5a : Olive Oil Production by Country, Figure 1.5b : Olive Oil Consumption by Country, Portugal 2% Morocco 3% Syria 5% Turkey 8% Algeria 2% Other 3% Spain 37% Portugal 3% Tunisia 3% Turkey 4% Syria 4% France 3% Algeria 2% Morocco 2% Italy 29% Tunisia 10% Greece 8% USA 6% Italy 15% Greece 15% Other 14% Spain 22% Source: IOOC 1997a, 1997c Although consumption in most olive producing-countries has increased very slowly over the last decade, and in some cases even decreased, consumption in new markets such as the United States, Canada, Australia and particularly Japan has risen much faster (see Table 1.1). 5

22 Table 1.1 : Trend in Consumption of Olive Oils, to (tonnes x 1000) Country (prov.) (est.) Italy Spain Greece USA Portugal Japan Canada Australia Source: IOOC 1997a, 1997c. Examination of per capita consumption figures during the past five years (see Table 1.2) indicates that consumption in some Mediterranean countries, particularly in Greece and Italy, has fallen, while consumption in new markets has shown a clear rising trend. Australia is the country outside the Mediterranean region with the greatest per capita consumption of olive oil. Table 1.2 : Per Capita Consumption of Olive Oil, (kg) Country Greece Spain Italy Portugal France Australia USA Canada Japan Source: Consumption figures in IOOC 1997a, 1997c; population figures in Oil World World Table Olive Market The market for table olives during the crop year exhibited a slight increase in both production and consumption. Production reached tonnes, 12.4 per cent above the average for the period to (see Figure 1.6). World consumption has risen 2.3 per cent above the 1990s average, to a record level of tonnes in As with olive oil, production of table olives in that year exceeded consumption. However, according to the IOOC this is not likely to continue as the increase in consumption of the past 6 years is expected to continue (IOOC 1997b). World production in is expected to fall by 5.9 per cent, but even so should still be well above the recent average (see Figure 1.6). Consumption, on the other hand, is expected to increase by 2.3 per cent. 6

23 Figure 1.6 : World Production of Table Olives, to Tonnes x (prov.) Crop years Average to (est.) Source: IOOC 1997b In the crop year world production of table olives was dominated by Spain (23.7%). Other significant producers were Turkey (18%), the United States (13.3%) and Morocco (9.7%) (see Figure 1.7a). The major consuming countries were the United States and Turkey each 15%, Italy (11%) and Spain (10%) (see Figure 1.7b). Figure 1.7a : Table Olive Production by Country, Figure 1.7b : Table Olive Consumption by Country, Argentina 4% Italy 5% Egypt 2% Israel 2% Jordan 2% Tunisia 1% Spain 23% Morocco 3% Syria 8% Egypt 3% France 3% Greece 2% Others* 30% Others* 11% Spain 10% Syria 9% Morocco 10% USA 13% Turkey 18% Italy 11% Turkey 15% USA 15% * producing/consuming less than tonnes Source: IOOC 1997b, 1997d Traditionally, green olives are the main type of table olive produced worldwide, followed by black olives and olives turning colour (see Figure 1.8). Although world production of table 7

24 olives was expected to fall during the crop year, production of green olives was forecast to increase by 2.5 per cent. Consumption of olives turning colour was expected to remain constant in , while consumption of black olives and green olives was expected to rise by 10.2 per cent and 1.7 per cent respectively, compared with the levels. Figure 1.8 : Production of Table Olives by Type, to Tonnes x Green olives Black olives Olives turning colour Total table olives Source: IOOC 1997b, 1997d (prov.) (est.) A closer examination of the production figures indicates that world production of green olives is dominated by Spain (39%), Syria (12%) and Morocco (10%) (see Figure 1.9a). Turkey (43%), Morocco (12%), Greece (10%) and Italy (10%) dominate production of black olives (see Figure 1.9b). The main producers of olives turning colour are the United States (56%) and Spain (25%) (see Figure 1.9c). Figure 1.9a : Production of Green Olives, Figure 1.9b : Production Black Olives, Figure 1.9c : Production of Olives Turning Colour, Israel 4% Egypt 3% Greece 3% Mexico 3% Turkey 3% Jordan 2% Spain 39% Syria 7% Italy 10% Tunisia 2% Egypt 2% Argentina 1% Turkey 43% Other* 9% Turkey 4% Syria 4% Morocco 2% Argentina 8% Other* 13% Greece 10% Morocco 10% Syria 12% Morocco 12% Other* 13% Spain 25% USA 56% * Producing less than tonnes Source: IOOC 1997b, 1997d 8

25 Spain (17%) heads world consumption of green table olives followed by Syria (11%), Italy (11%) and the U.S. (10%) (see Figure 1.10a). Turkey (30%) dominates consumption of black olives, with Italy (13%) and Syria (6%) also significant users (see Figure 1.10b). The main consumers of olives turning colour are the U.S. (48%) and Spain (12%) (see Figure 1.10c). Figure 1.10a : Consumption of Green Olives, Figure 1.10b : Consumption of Black Olives, Figure 1.10c : Consumption of Olives Turning Colour, Brazil 7% Israel 4% Egypt 4% Argentina France 3% 3% Morocco 3% Other* 27% Greece 4% Syria 6% Morocco 3% Germany 3% France 3% Other* 38% Spain 12% Turkey 5% Syria 4% Other** 31% USA 10% Italy 11% Syria 11% Spain 17% Italy 13% Turkey 30% USA 48% *consuming less than tonnes* ; *consuming tonnes or less* Source: IOOC 1997b, 1997d On a per capita basis Syria dominates world consumption of table olives (see Table 1.3), followed by Spain, Greece, Italy and Turkey. The United States, Australia and Canada have recorded modest increases in per capita consumption. Table 1.3 : Per Capita Consumption of Table Olives, (kg) Country (prov.) 1997 (est.) Syria Spain Greece Italy Turkey Morocco USA Australia Canada Japan Source: Consumption figures in IOOC 1997b, 1997d; population figures in Oil World World Trade in Olive Products Olive oil During the 1990s there has been an appreciable increase in world trade of olive oil (see Table 1.4). In the crop year the total was expected to be about tonnes. Spain continues to be the major exporter with an expected share of 34 per cent of total world 9

26 exports in Italy is also a major exporter (24%). Approximately 75 per cent of Spanish olive oil exports go to the European region, while less than a third of Italian olive oil is exported to that region. As a result Italy is the major exporter of olive oil to non-european countries. Table 1.4 : Main Olive Oil Exporting Countries, to (tonnes x 1000) Country (prov.) (est.) Spain Italy Greece Tunisia Turkey Others Total Source: IOOC 1996a, 1997a, 1997c. For the crop year it is forecast that tonnes of olive oil will be imported around the world. Italy is the largest importer accounting for approximately 29 per cent of the total, followed by the United States (22%). Non-European countries, in particular Japan, Canada, Brazil, the United States and Australia have been increasing their imports (see Table 1.5). Table 1.5 : Main Olive Oil Importing Countries, to (tonnes x 1000) Country (prov.) (est.) Italy USA Spain France Australia Brazil Canada Japan Others Total Source : IOOC 1996a, 1997a, 1997c Table Olives For the crop year, exports of table olives were expected to total more than tonnes (see Table 1.6). Spain is by far the largest exporting country (39%), followed by Morocco (19%). 10

27 Table 1.6 : Main Table Olive Exporting Countries, to (tonnes x 1000) Country 1991/ / / / / / /98 (prov.) (est.) Spain Morocco Greece Argentina Turkey Mexico USA Others Total Source: IOOC 1996b, 1997b, 1997d Approximately tonnes of table olives will be imported during the crop year (see Table 1.7). The main importing countries are the United States (25%) and Italy (14%). Table 1.7 : Main Table Olive Importing Countries, to (tonnes x 1000) Country (prov.) (est.) USA Italy Brazil France Germany Canada Australia Others Total Source: IOOC 1996b, 1997b, 1997d 1.6 European Assistance As close to 70 per cent of world production and consumption of olive products occurs within the EU, it is important to be aware of the aid schemes and protection measures that exist there. Changes in those arrangements are likely to have an impact on the European industry, affecting world prices and the international supply and demand of olive products The International Agreement on Olive Oil and Table Olives sets up a series of principles regarding olive production, olive trade, olive assistance and other olive related issues. The International Olive Oil Council (IOOC) administers the Agreement. The main rules governing the regime are: Regulation 136/66 established on 22 September 1966 is one the oldest commodity agreements. It lays down principles with respect to olive cultivation, olive oil production and trade. The regulation provides for the setting of different prices and for grant assistance. It also establishes the rules for the formation of local producer organisations that have responsibilities for payment of production aid. Regulation 2261/84 establishes the rules for the production aid system. Regulation 3089/78 establishes the rules for the consumption aid system. 11

28 Regulations 1562/78 and 3994/87 add to Regulation 136/66 on imports of olive oil. They establish the rules for the imposition of import levies. Regulations 1562/78, 1650/86 and 120/89 add to Regulation 136/66 on exports of olive oil. They establish how export funds are to be granted and the rules for the imposition of export levies. (IOOC 1994) Price Mechanism The IOOC has established a pricing system, under which prices are set annually for each member state. The prices assist in calculating the levels of assistance provided to producers and processors. Table 1.8 shows the different prices and rates of assistance for the years and Table 1.8 : Prices and rates of assistance (ECU/100 kg), and Production target price Production aid Intervention price Representative market price Consumption aid Source: IOOC 1997e; EC 1996b The production target price represents a fair return to producers. The intervention price is the price paid by the intervention agencies to olive oil producers. The representative market price is the price at which it is expected that olive oil will sell in competition with other vegetable oils. The target price, intervention price and production aid are set by the IOOC at the beginning of each crop year (August) and remain unchanged for that year. The threshold or entry price is the price at which the imported olive oil is similar to the representative market price, taking into account consumption aid. The IOOC can alter the representative market price and the entry price at any time (IOOC 1994; IOOC 1997e) Intervention Agencies Agencies appointed by producer members have the responsibility of buying any quantity of oil presented by producers, at the intervention price. They can then re-sell the oil only within the EU. An intervention agency also has the obligation of storing buffer stock when so requested by the IOOC Consumption Aid Consumption aid was established as a means of maintaining and increasing olive oil competitiveness with respect to other vegetable oils. Assistance is provided to olive oil bottling and canning companies for olive oil that is produced and traded within the EU. The IOOC establishes the level of assistance before the start of the marketing year. The level of assistance is obtained by deducting both the production aid and the representative market price from the production target price (IOOC 1994). 12